'New GM' May Not Be Liable For Accidents That Happened Before The Company Went Bankrupt

General Motors Renaissance Center in Detroit.
High Gear Media
As you probably know by now, General Motors is in hot water for a series of recalls that affect more than 1.3 million vehicles in the U.S. The National Highway Traffic Safety Administration, in particular, wants to know why GM is just now recalling the cars, when it began receiving complaints about the underlying problem more than a decade ago.

The recall stems from dodgy ignition switches on select Chevrolet, Pontiac, and Saturn vehicles from the 2003 to 2007 model years. Those switches have been linked to at least 31 collisions and 13 deaths. Chances are good that consumers will file some kind of class action lawsuit against the automaker, but whether they'll win their case is up for debate.

That's because GM filed for bankruptcy in 2009, and in doing so, it became a new legal entity. General Motors Corporation was laid to rest, and from its ashes arose General Motors Company.

The name change may seem insignificant -- heck, they didn't even have to change the monogrammed hand towels in the executive restrooms -- but it carries big implications for the current recall. That's because, of course, the company that made the defective vehicles no longer exists, and GM Company has little if any liability.

As AutoNews points out, today's General Motors Company is only liable for accidents that occurred after the automaker emerged from bankruptcy in July of 2009. Any collisions or deaths prior to that would've happened on General Motors Corporation's watch. Plaintiffs can still sue the "old" GM, but they'll have to do so in bankruptcy court, where payouts are hard to come by.

It's worth noting that under normal circumstances, General Motors Company wouldn't be liable for any accidents involving 2003-2007 models because technically, it didn't manufacture them. However, during the restructuring process, pressure from advocacy groups made GM accept liability for older models when those models were involved in accidents after the bankruptcy process wrapped up. In this case, that includes at least one death that took place in December 2009.

This might seem like good news for GM investors and its new CEO, Mary Barra, but it's potentially disastrous news for GM's publicity team, who will probably to have to spend a lot of time defending the "new" company in the press if it refuses to offer compensation to those who've been injured or the families of those who were killed due to the flaw. (GM surely knows this -- otherwise, it might not have offered to fix the older models at all.) We'll keep you posted.